In economics, broad money refers to the most inclusive definition of the money supply. Since cash can be exchanged for many different financial instruments and placed in various restricted accounts, it is not a simple task for economists to define how much money is currently in the economy. Therefore, the money supply is measured in many different ways. Broad money is used colloquially to refer to a broad definition of the money supply.
In the U.S. the most common measures of the money supply
are termed M0, M1, M2 and M3. These measurements vary according to the liquidity
of the accounts included. M0 includes
only the most liquid instruments, and is therefore narrowest definition of
money. M3 includes liquid instruments as well as some less liquid instruments
and is therefore considered the broadest measurement of money. Complicating the
situation, different countries often define their measurements of the money
slightly differently. In academic settings, the term "broad money"
should be separately defined in order to prevent potential misunderstandings.